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Ford posts $2.4 billion profit

Ford's cash total rose $700 million from March 31. Its debt fell $2.6 billion to $14 billion.

Ford Motor Company reported a profit of $2.4 billion on revenues of $35.5 billion, excluding Volvo, during the second quarter, the automaker said Tuesday.

A year ago, Ford posted net profits of $2.6 billion on revenue of $35.07 billion, including Volvo. Excluding Volvo, Ford's revenue in the second quarter of 2010 was $31.3 billion.

"We delivered very good second-quarter results while growing the business globally and serving more customers in every region," Ford CEO Alan Mulally said in a statement. "Despite an uncertain business environment, we further strengthened our balance sheet and continued to invest for the future."

More cash, less debt

"We're off to a really good first half," Lewis Booth, Ford's CFO, said in a media briefing. "We're now at $14 billion net debt and net cash of $8 billion, which is a substantial improvement from the first quarter." Net cash is gross cash minus debt.

Ford's cash total rose $700 million from March 31. Its debt fell $2.6 billion to $14 billion.

Ford said second-quarter profits declined in its South America, Europe and Asia Pacific Africa operations.

Ford Motor Credit Co. posted a pretax operating profit of $604 million, down $284 million from a year earlier. The finance unit continues to benefit from strong residuals but is still hampered by less favorable credit loss reserves and lease depreciation expenses.

Booth stopped short of predicting when Ford would earn an investment grade credit rating. He noted that the rating agencies have made it clear they want the automaker to meet several requirements, including resolving contract talks with the UAW this summer. But Booth said if Ford continues to report profits and reduce debt, "We expect to get to investment grade sooner rather than later."

Booth added, "It wasn't an easy quarter." He said demand weakened in North America after the March earthquake in Japan interrupted production for many automakers. Even though Ford's production was minimally impacted, a shortage of cars kept some shoppers out of the market in both North America and Europe.

Ford is maintaining its U.S. full-year industry volume outlook in the range of 13 million to 13.5 million units, Booth said.

"We expect it to be closer to 13 million," he said. Several analysts have lowered their outlooks to below 13 million, citing sluggish economic growth and earthquake-related inventory shortages.

Booth added there will be some improvements in the second half as Japanese production ramps up.

"We expected a relatively quiet year this year and that's what we're going to see," he said.

All oil-driven commodity prices--including steel, aluminum and plastic--remain under upward pressure, Booth said. He reiterated Ford's guidance that its commodity costs would be $2 billion higher this year than last year.

First equals best

Ford posted first-quarter net profits of $2.55 billion on revenues of $33.11 billion and said in April it would be the best quarter this year because it planned to hike spending in following periods.

Ford has budgeted $5 billion to $5.5 billion in capital outlays this year, with the bulk of it taking place after the first quarter.

In the second quarter, Ford North America reported a pretax operating profit of $1.9 billion, an increase of $10 million from a year ago. Ford attributes that rise to improved net pricing, higher volumes and a more favorable mix of vehicles, meaning more sales of higher-margin cars and trucks.

Those positives were offset by higher commodity and structural costs, as well as increased spending on new products.

Special losses

Ford's second-quarter net also was dragged down by special losses of $272 million, $177 million more than a year earlier. The special losses covered personnel-reduction actions, the closing of its Mercury brand and other dealer-related actions in North America, and pension settlements in Belgium.

Ford sold 736,000 vehicles to dealers in the quarter, up 77,000 from a year earlier. North American revenue was $19.5 billion, up $2.6 billion from a year earlier.

Ford said second-quarter profits declined in its South America, Europe and Asia Pacific Africa operations.

U.S. vehicle sales slowed across the industry during the second quarter compared with the first quarter because of inventory shortages and slower economic growth.

Ford's U.S. sales rose 9 percent during the period to 574,228 units.

"The key debate around Ford continues to be the sustainability of--or potential for improvement in--North America pretax profits," Barclays analyst Brian Johnson said in a report Monday.